Watching regulatory bodies deal with issues around fast-moving technologies has always been an agonising business. Not so much an embarrassing uncle dancing at a wedding, more a high-court judge trying to describe dubstep.
Latest in the line of such cases is the decision by the US department of justice to launch an antitrust case against America's biggest company, Apple, and a group of book publishers – essentially for charging too much for ebooks and using what is known here as "an agency model" but which in the UK might be described as a cartel.
At the root of the case is not an issue about book pricing per se but about a major struggle in what is fast becoming a duopolistic market for paid-for content on "tethered" devices. In one corner is Amazon, which here has the law on its side, and in the other is Apple. Both are pretty ugly bruisers in terms of market size, and in the middle are book publishers who must be wondering what they have done to provoke the deities into inflicting a plague on paid-for text.
As many commentators have pointed out in the US, this standoff between two enormous virtual distributors really came about in the first place because Amazon held a monopoly position in the emerging ebook market which amounted to a market share of about 90% some two years ago.
Apple's iTunes store and its iPad devices are in a shiny-things fight with Amazon's Kindle and its own network of online sales stretching from books to dog kennels. Apple, in attempting to break the stranglehold of Amazon, offered book publishers the opportunity to have more say over how their books were priced, gave them the option to set a minimum price, the routine 30% cut to Apple and an accompanying exclusion clause for others (Amazon) to sell books at a lower price.
Although in many ways not at all surprising – the justice department is after all representing the interests of consumers – the antitrust initiative reveals a fundamental problem with market regulation in a converging world. What we have seen on both sides of the Atlantic, and in any market where groups of services are offered by the same distributor, is that each will ruthlessly cut the price of that which is of least value to it to attract customers. A classic example of this might be that Sky would offer cheaper broadband to customers who take its exclusive sports packages, while BT might offer cheaper TV services to retain broadband and telephony customers.
A step back from this also highlights how powerless those in publishing – and yes newspaper companies are publishers too – are in the world of global platform distributors such as Apple and Amazon. Having briefly been involved in negotiations on the other side of the table from both, the devil and deep blue sea are equally uninviting. Open web platforms and new experiments in independent publishing are beginning to show the fuzziest of green shoots as experimentation grows in the market. Better third-party platforms are now able to emerge which allow more control for producers over price.
These are attractive options but they contend with the overwhelming scale and payment systems of far greater entities. The only good outcome of the decision is that it has served up another lesson in how regulators at all levels need to be more knowledgable about the digital environment their principles are being applied to.
